FSAs: One of the Best-Kept Financial Secrets

Million of Americans are missing out on one of the best-kept financial secrets in America: Flexible Spending Accounts. Are you one of them?

What is a Flexible Spending Account and why should you care?

A flexible spending account is a benefit offered by many employers to help you pay for expenses not covered by your health insurance (85% of companies with over 500 employees offer FSAs). Examples of expenses that can be covered by funds in a flexible spending account range from out-of-pocket co-pays for doctor visits and prescriptions to a range of qualified dental and eye care expenses such as braces and eyeglasses.

Yet each year nearly 80% of Americans eligible for this valuable benefit fail to use it. That’s why I’ve teamed up with WageWorks on a SaveSmartSpendHealthy campaign to highlight the benefits of FSAs. Let’s face it. In today’s economy, millions of hard-working Americans are struggling to make ends meet. In this kind of environment it’s vital to stretch every dollar as far as you can. Here’s how FSAs can help you do that:

A. FSAs save you money. The reason is that you are spending pre-tax dollars. If that sounds like a bunch of financial mumbo-jumbo, think of it this way. Say your health care plan doesn’t cover dental visits. You go for a check up and the bill is $100. If your effective tax rate is 33% you’d have to earn $150 to pay for that $100 visit. If you participate in an FSA, however, you’d only have to earn $100 to pay that $100. You can learn more about what types of expenses FSAs can cover at SaveSmartSpendHealthy.com.

B. FSAs help you to stay on budget. Studies show that people who write down their goals are more likely to achieve them. People who are on diets tend to eat less when they commit to writing down everything that goes in their mouths. In other words – what gets measured gets managed. So if you want to better manage your money, paying attention to what you are spending on healthcare costs can really help. The sheer act of signing up for and participating in an FSA can help you stay on top of your healthcare costs by tuning you into them.

C. FSAs help you stay healthy. Perhaps the best part of all, FSAs make it more affordable for you to get preventative care – get those teeth cleaned, have regular annual physicals, take and stay on prescribed medication. According to the National Bureau of Economic Research, over one-quarter of Americans have cut down on their preventative care since the economy started its downward spiral in 2007. If there’s one investment that never fails, it’s taking care of your health. That’s why learning the ABCs of FSAs is so rewarding.

If you don’t know whether you have access to an FSA, talk to your HR department today.

2 Replies to “FSAs: One of the Best-Kept Financial Secrets”

  1. I never thought I could afford braces for both kids at the same time. I took advantage of my FSA at work and have almost paid off the $11,000 they cost. My paychecks were not noticably smaller so it was painless. If I had tried to save that money toput them in braces, they be thirty by the time I saved that much.

  2. Elizabeth – Thanks so much for sharing your experience. Many hard-working Americans fail to take advantage of this fantastic benefit that really can improve the quality of their family’s life and reduce financial stress. Such a win-win. Hopefully your tangible example will inspire more folks to take a second look at what I strongly believe is one of the best kept secrets when it comes to corporate benefits. Your kids are lucky to have such a financially savvy mom – and if you feel comfortable, I’d encourage you to share your experience with friends and neighbors. It’s person to person that we’ll spread the word about way we can all “stretch out dollars ’till they holler” as one of my friends wise grandmothers was fond of saying!

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